InPhonic handed out cell phones for free or nearly free, and the carriers covered the cost. Shoppers on its websites picked a phone and a plan side by side. Each carrier paid InPhonic a commission for every new customer it signed. Americans were trading up to camera phones and comparing plans from a crowded field of carriers. The Washington, D.C. company went public in November 2004, as people got used to buying big things online.

Commissions Pay for Handsets

InPhonic bet that buying a phone plan, a confusing purchase full of fine print, would move online. It ran its own sites and powered stores for other brands. Carrier commissions paid for the cheap handsets. The model grew fast, and its sites became some of the largest online sellers of wireless plans in the country. It also rested on two weak points: rebates, and customers staying with their carriers long enough for the commissions to hold.

Rebates and Reckoning

InPhonic priced its IPO at $19 a share in November 2004, above its first range of $15 to $17, and listed on Nasdaq. Revenue grew quickly, and losses grew too. Customers complained about slow and missing rebates. Carriers clawed back their payments when subscribers cancelled early. In November 2007 InPhonic filed for Chapter 11 bankruptcy, and a new owner bought its assets soon after.

Cover: Telegraphic Love, Hablot Knight Browne. Art Institute of Chicago, public domain. Chosen for telegraphic love (a phone in the mail).